Buoyant economy spells fortunes

Updated: Apr 30 2006, 05:30am hrs
DS Kulkarni Developers (DSKD) is mainly engaged in property development, which includes location identification, site selection, land acquisition, planning and outsourcing construction activity. The company is primarily involved in residential projects and has completed 23 residential projects. Presently, DSKD has approximately Rs 555 crore worth of projects to be completed. DSKD is focusing on the IT hubs of India for its projects.

Buoyancy in the economy is propelling the construction boom. Double income and nuclear family structures are fuelling the demand in the residential sector. Construction activities account for approximately 6% of the GDP. Recently, foreign direct investment was permitted in the real estate sector. This will bring structure and professionalism into this industry.

Objects of the issue

The company is raising funds to finance the company's ongoing and new residential and commercial real estate development projects. The company has crystallised plans to develop nine projects at various sites in Pune, Mumbai and Bangalore. Besides these, the company also seeks to acquire more properties in Hyderabad and New Delhi.

Financials

Rising property prices, along with robust demand, are doing well for the fortunes of this company. For FY05, total income and net profit of the company were at Rs 53.6 crore and Rs 3.65 crore as against Rs 51.25 crore and Rs 1.41 crore, respectively for FY04. However, total income and net profit for 9MFY2006 are at Rs 66.47 crore and Rs 11.9 crore respectively. DSKD's turnover has grown at a CAGR of 25% over a five-year period from FY2000- 05.

Valuations

Post-rights and public issue, total promoter and promoter group holdings will come down to 21.05% from the present 24.18%. The rights were priced at Rs 110 per share in the ratio of one for every two shares held in the company.

Based on 9MFY2006 results, EPS works out Rs 7.21 on post-issue capital. The P/Ex for the public issue on the lower end works out to 35(x) and 38(x) on the upper end of the price band. Post-issue the share capital will be Rs 22 crore. Total debt for FY2005 was at Rs 63 crore with an interest outgo of Rs 2.75 crore. The stock is presently trading at Rs 386.

Risks

Some of the major concerns are delay in completion of projects. The legal, administrative and licensing issues can add to delays. Fall in property prices or slackening of demand can affect the revenues of the company.